Berkshire Hathaway says tax law gives it $29B boost in 4Q

Mar 02, 2018, 03:29
Berkshire Hathaway says tax law gives it $29B boost in 4Q

As Mr Buffett says: "Wall Street prospered ... many investors experienced a lost decade".

For 2017, net earnings attributable to Berkshire shareholders surged to USD44.94 billion from USD24.07 billion in the previous year.

Buffett's yearly missive included an explanation of Berkshire's 2017 results, which included the conglomerate tallying a more than $29 billion gain for 2017 due to the tax overhaul passed by Congress late previous year. The reforms give the vast majority of taxpayers lower tax bills in the immediate future.

Buffett, CEO of the multinational holding company Berkshire Hathaway and one of the richest people in the world, raised his company's stock in Apple by 3 percent in November - a fresh vote of confidence in the Cupertino tech giant.

The industrial giant hasn't approached Buffett about large divestitures, he said.

In 2014, Buffett said he plans to put 90 per cent of the money he leaves to his wife, Astrid, when he dies into an S&P 500 index fund, and 10 per cent in government bonds.

He said the initiative seeks "fundamental change" in US health care, with medical care at least as good but with costs not continuing to eat up an increasing share of the economy.

"We can take a small imbalance" or trade deficit, he said.

He noted that new rules, under generally accepted accounting principles (GAAP), mean that the net change in unrealized investment gains and losses in stocks the company holds must be included in all net income figures it reports.

"Berkshire's blood flows through their veins", Buffett wrote. His view that acquisitions need to come with "a sensible purchase price" prevented Berkshire from making a big deal in 2017, he wrote.

Buffett said Berkshire functions like a savings account, so it doesn't pay dividends.

"It's a way of saving money over time", he said.

He said Wells Fargo had bad incentives for some employees, which led to serious misconduct that was not stopped by its previous management.

In his letter to investors, Mr Buffett said the tax cut accounted for almost half of the firm's gain in net worth during 2017.

One is Wells Fargo & Co, the third-largest US bank, which was surprisingly ordered this month by the Federal Reserve to curb asset growth while it tries to rebound from scandals over how it treated customers.

There are 17 pages in all of Warren Buffett's words, I think it's well worth a read. The magic touch of Buffett and Munger can also be seen in the current equity portfolio of Berkshire Hathaway. For the full-year 2017 insurance investment income passed $3.9 billion for the firm, up approximately $300 million on the prior year. Upwards of 40% of one of Buffett's key reinsurance companies is now flowing each year from a deal with IAG that helps underpin the financial viability of both companies.